Why has De la Rue, a black-listed company by the Reserve Bank of India previously, been given the contract to supply machinery for the re-printing currency notes, without any official announcement being made? Until April 2016 at least, De La Rue continued to supply paper for this printing, and was re-issued tenders by the Modi Govt for this highly sensitive activity despite being banned for national security reasons in 2010-2011; Moot question is who supplies the paper for the printing now?
The Reserve Bank of India has, mysteriously, without any public announcement, re-allowed currency notes to be printed at presses with machinery supplied by a previously blacklisted company, De La Rue, banned by India in 2010-2011. While the RBI circular that can be read on its website makes a vague reference to only presses with sophisticated equipment supplied by De La Rue (now renamed KBA Giori), the company’s own website clearly announces interest and role in printing of the currency. Unconfirmed sources from the RBI who requested anonymity told Sabrangindia that after the De La Rue's alleged involvement in the Panama papers scam, April 2016, this company has been 'again black-listed' from supply of paper. There is no official explanation, however of why a foreign company, black-listed on national security concerns (2011) was allowed to supply paper again by the Modi government, without any public announcement between 2014 and 2016. There is also no announcement of this reported recent black-listing on any official government, or the RBI website.
Besides Right to Information (RTI) queries to the Reserve Bank of India (RBI) have been sought on some crucial issues to get these answers. These queries are from activists to the RBI[1] demanding to know whether the paper supplied for the printing of the new notes after de-monetization is paper supplied by De La Rue(UK) and Louisenthal (Germany). These replies assume significance in the wake of the fact that it was on the issue of quality of paper (and security of currency notes) that the 2011 ban had been put into effect in the first place.
Besides, as this article in an investment journal points out, De La Rue could be a major player in prime minister Modi’s Make in India schemes. An announcement claims, “De La Rue is a UK-headquartered banknote manufacturer which has embraced the Indian government’s Make in India clarion call. Here the CEO talks ‘India Investment Journal’ through the company’s journey in India.”
The issue raises serious questions of national security as the black-listed company, de La Rue, before being black-listed –when investigated by the CBI in 2010-2011 was found to involved in dealings of counterfeit currency. Seizures of counterfeit currencies made by the enforcement agencies had revealed that the quality of notes were identical to the legal currency notes and it was difficult for even the banks to identify the differences. Intelligence reports suggest counterfeit currency notes are printed in high-security press in Pakistan and smuggled into India and distributed to destabilize the Indian economy.
Besides national security concerns, sources told Sabrangindia that Italy-based Fabriano Securities, also allegedly named in the Panama off shore companies scam has been the supplier for the security thread for the new currency notes (after de-monetization). The quality of supply of this security thread is in question now with colour running and other complaints coming in of the greeatly-in-demand currency.
National Security Concerns Brushed Of
While concerns of national security have so far been brushed of by officials in the government, what is being ignored is that the Serious Fraud Office (SFO) of the United Kingdom (UK) itself, in 2010 found serious security breaches De La Rue. In their inquiry, the SFO had uncovered that a number of De la Rue employees had deliberately falsified certain paper specification test certificates for some of its 150 clients. Recently it was also revealed in the Panama Papers that De la Rue paid out a 15% commission to a New Delhi businessmen to secure contracts from Reserve Bank of India. There are also reports that De la Rue paid £40m in settlement to the RBI for issues in production of paper notes.
Why then must India allow such a company with this track record to supply machinery and possibly even print currency notes when the government’s public claim is to rid the market of counterfeit and even those notes that fund terrorism?
The RBI Circular and De La Rue
The Reserve Bank of India(RBI)’s official circular can be read here. “The machinery at Mysore Site has been supplied by M/s. De La Rue Giori, now KBA Giori, Switzerland and that of Salboni by M/s. Komori Corporation, Japan. Both the presses are equipped with sophisticated Security Surveillance Systems.” This contract was given without any public announcement. The fact that this company had not just been officially blacklisted by the RBI in January 2011, but that official evidence of this black-listing (circulars of the MHA and other government agencies) have vanished from the government website has made this even more sinister.
On December 21, 2011 the then MOS, Finance, Namo Narain Meena had informed the Rajya Sabha the government has banned a British firm supplying currency note papers after it was detected that the company had been providing papers not conforming to the security features agreed upon.
The Times of India had reported that, “in response to a question that De La Rue had contracts with Bharatiya Reserve Bank Note Mudran Private Ltd (BRBNMPL) for supply of bank note papers in India. "However, during July-August, 2010, it came to the notice that the paper being supplied by De La Rue was not conforming to some of the prescribed specifications," Meena said. The minister said, "The deficiency in the paper was subsequently admitted by De La Rue after which the security clearance was denied to the British firm."
The newspaper had commented,
“The disclosure raises concern as several recent seizures of counterfeit currencies made by the enforcement agencies had revealed that the quality of notes were identical to the legal currency notes and it was difficult for even the banks to identify the differences. Intelligence reports suggest counterfeit currency notes are printed in high-security press in Pakistan and smuggled into India and distributed to destabilize the Indian economy.
The Indian Express had then reported in 2011 that
“that the country's principal currency paper supplier, British firm De La Rue, was blacklisted by the government last year with 2000 metric tonnes of its paper lying unused at printing presses and godowns.
The key complaint against De La Rue was that its currency paper failed to meet certain security parameters during testing — both in India and at De La Rue's laboratory."
De La Rue’s dubious background and questionable business practices were further exposed in April 2016 by the Indian Express.
The Indian Express had reported on April 7, 2016 that
“The world’s largest commercial banknote maker, De La Rue, had contracted a New Delhi businessman to help it bag tenders in India in return for a 15 per cent commission, besides significant amounts as out-of-pocket expenses towards marketing services, Mossack Fonseca (MF) papers accessed by The Indian Express show.
The hard question is: are the new Indian currency notes printed with the involvement of blacklisted Crown Agent companies who supplied and were the source of fake notes for Pakistan and this at the expense of India’s National Security?
De La Rue International Limited, trading as Portals, entered into an Agency Agreement with Aphra Consultants SA on April 1, 2002, through which Aphra was appointed non-exclusive consultant to introduce business opportunities for De La Rue in South East Asia, including India.
“The world’s largest commercial banknote maker, De La Rue, had contracted a New Delhi businessman to help it bag tenders in India in return for a 15 per cent commission, besides significant amounts as out-of-pocket expenses towards marketing services, Mossack Fonseca (MF) papers accessed by The Indian Express show.
“De La Rue International Limited, trading as Portals, entered into an Agency Agreement with Aphra Consultants SA on April 1, 2002, through which Aphra was appointed non-exclusive consultant to introduce business opportunities for De La Rue in South East Asia, including India.
“Aphra was an offshore entity based in Panama and its final beneficial owner was Somendra Khosla, whose address is specified in the MF papers as D-984, New Friends Colony, New Delhi 110065. Portals, which has been supplying banknote paper to the Bank of England since 1724, was acquired by De La Rue in 1995. The agreement was in effect at least until June 2008, the MF papers show.
On August 15, 2002, four-and-a-half months after the Agency Agreement was signed, De La Rue Managing Director James Hussey wrote to Aphra, amending the agreement to allow Portals to authorise a payment of £ 500,000 (Rs 3.74 crore @ Rs 74.82 to a pound as on August 15, 2002) to the company
Why then did the Government of India and the Reserve Bank of India hesitate to make any public announcement on the re-introduction of De La Rue machinery by the RBI?
Any announcement would have revealed that M/s. De La Rue Giori, now KBA Giori, was
“banned after a public outcry (2009-2010) over the outsourcing of printing of currency notes to the very same company, de La Rue that was found by the CBI to be involved in a fake currency printing racket—printing currency for both Pakistan, Nepal and Pakistan.”
The Afternoon Despatch & Courier had then reported that,
“Our investigation led us to a company called DE LA RUE and this company is at the centre of this fake currency racket. This company has its biggest contract with RBI and it provides India with special watermark paper for printing currency. The moment RBI was raided the shares of this company plunged.
“On the 5th January, 2011 India severed all business relations with DE LA RUE. It came to light that RBI had disbursed the contract of 16000 tons of printing paper to four competitors of DE LA RUE. DE LA RUE was not even invited to bid. But the government has not come out with the reason for doing so and it did not decide to take the Parliament into confidence. It also came to light, upon the statement of Tim Cobald of DE LA RUE, that the company was still in talks with government of India. Now what is the government still talking about with the company?
The announcement of the discontinuation of the Rs. 500 and Rs. 1000 notes dramatically on the night of November 8, 2016, a Tuesday, over a fortnight ago, sparked off a wave of mixed feelings of panic, chaos and celebrations throughout the country. The move apart from having its pros and cons also raises certain critical questions.
Is De la Rue involved in the printing of the new Rs 2000 notes?
As per a recent report by Economic Times,
[The notes] were largely printed at Mysuru under utmost secrecy while the paper note on which the printing was done came from Italy, Germany and London.
The printing, according to officials, began in August-September and nearly 480 million notes of Rs 2,000 denomination and an equal number of Rs 500 denomination were printed. The printing facility at Bharatiya Reserve Bank Note Mudran Private Ltd. (BRBNMPL) in Mysuru under Reserve Bank of India was set up with the De La Rue Giori, now KBA Giori, Switzerland.
The Hindu reported,
India imports bank note papers from European companies like Louisenthal in Germany, De la Rue in United Kingdom, Crane in Sweden and Arjo Wiggins in France and Netherlands.
India had blacklisted two European firms in 2014 amid reports by security agencies that the security features, which come embossed on bank note paper, were compromised and given away to Pakistan.
There are even plans to circulate plastic or semi-plastic Rs 10 notes in place of the paper ones:
The secretive Bharatiya Reserve Bank Note Mudra Private Limited, a wholly owned subsidiary of the RBI, that prints notes has selected four entities – UK-based De La Rue, Australia’s Innovia, Munich-based Giesecke & Devrient and Swiss company Landquart – to supply three kinds of plastic notes.
De La Rue already supplies paper notes to India but has been rattled by the controversy over the recent Panama leaks. It has recently been contracted to supply polymer note making technology to China and plans to make pure polymer notes for India too.
But the ban was lifted and the companies were removed from the blacklist. Why? Here is the reason given for the lifting of the ban.
“These companies are in the business for 150 years; they will not hamper their trade by passing on information of one country to another. Some of these firms even print currency notes for smaller countries. After the investigations, it was found that the two firms had not compromised the security features and the ban was lifted,” said the official.
Is this enough of a guarantee?
However the Serious Fraud Office (SFO) of UK itself in their inquiry had uncovered that a number of De la Rue employees had deliberately falsified certain paper specification test certificates for some of its 150 clients. Recently it was also revealed in the Panama Papers that De la Rue paid out a 15% commission to a New Delhi businessmen to secure contracts from Reserve Bank of India. There are also reports that De la Rue paid £40m in settlement to the RBI for issues in production of paper notes.
Even so after all this it has been given clearance and there are even plans in discussion with De la Rue for setting up of a security paper mill and a research and development centre of identity software in Madhya Pradesh. Martin Sutherland the new CEO of De la Rue in an interview titled Giving Make in India the Currency to Succeed with India Investment Journal said that under the UK-India Defence & International Security Partnership Agreement which was signed in November 2015, De La Rue is committed to supporting both governments on the subject of counterfeiting under this agreement.
However there has been no official announcement made regarding the lifting of the ban on De la Rue and its removal from the blacklist apart from the news report. De la Rue that almost went bankrupt after losing RBI contracts reported a whopping 33.33% rise in its shares in the last six months.
The question that still need to be answered is; are the new Indian currency notes printed with the involvement of blacklisted Crown Agent companies who supplied and were the source of fake notes for Pakistan at the expense of India’s National Security?
RBI Rocked & Parliament Shocked
Sometime during 2009-10 CBI raided some 70-odd branches of various banks on the India-Nepal border from where counterfeit currency racket was unearthed. The officials of these branches told CBI that they had got these notes from RBI which led CBI to raid the vaults of RBI. What CBI found in the vaults of RBI were huge cache of counterfeit Indian currency lying in the denomination of 500 and 1000, the same counterfeit currency smuggled by the Pakistani intelligence agency ISI into India. The question was how did these fake currency landed in the vaults of RBI?
Later in 2010 the Committee on Public Undertakings (COPU), an Indian Parliamentary committee was shocked to find out that the Government had outsourced the printing of Rs 1 lakh crore of currency notes to US, UK and Germany putting the “entire economic sovereignty (of the country) at stake”.
The 3 companies to whom the Indian currency printing was outsourced are American Banknote Company (USA), Thomas De La Rue (UK) and Giesecke and Devrient Consortium (Germany).
Following the scandal the Reserve Bank sent a senior official on a fact-finding mission to De La Rue‘s printing plant in Hampshire, UK. RBI which imports 95% of its security paper requirements and which is believed to account for up to a third of De la Rue’s profits excluded De la Rue from new contracts. De La Rue was blacklisted by the government with 2000 metric tonnes of its paper lying unused at printing presses and godowns. It was a disaster and De la Rue’s CEO James Hussey who is the godson of the Queen of England herself quit the company mysteriously. De la Rue’s shares tanked and it almost went bankrupt losing one of its most valuable customer – RBI. Its French rival Oberthur approached De la Rue with a bid to takeover the company which was fought back.
The complaints sent to the Central Vigilance Commission (CVC) by ‘unnamed officers of the Ministry of Finance’ mentioned other companies too. These include French firm Arjo Wiggins, Crane AB of USA and Louisenthal, Germany. However as recently as January 2015 the Home Ministry barred the German company, Louisenthal, from selling bank note paper to the RBI after it discovered that the firm was also selling raw notes to Pakistan.
So who are these currency printers and how did they end up printing currency notes for the Indian government? How did the company from getting blacklisted to a point of bankruptcy rose to its feet and is preparing to enter the Indian market again? Most importantly why is it that the common Indian know nothing about it? Here is a brief story of these Money Makers.
As per official history the bank note printing in India started in 1928 with the establishment of India Security Press at Nashik by Government of India. Until the commissioning of Nashik Press the Indian Currency Notes were printed from Thomas De La Rue Giori of United Kingdom.
Even after Independence, for 50 years, Free India printed its rupees on machines bought from De La Rue Giori, run by the Swiss family Giori and till recently said to control 90 per cent of the banknote printing business. But than something happened at the closing of the 20th century that changed everything.
Who Prints the Money, Worldwide?
The high-security currency printing and technology business is dominated by a few Western-European companies. In his book Money Makers – The Secret World Of Banknote Printing author Klaus Bender offers a detailed view of the banknote industry and its modus operandi by removing the industry’s carefully imposed shroud of secrecy. The only previous attempt to reveal this story was published in 1983 by an American author, Terry Bloom in his book “The Brotherhood of Money – The Secret World of Banknote Printers”. The entire edition of that book was bought up – straight from the printing presses – by two prominent representatives of the industry to prevent the public from getting an inside view of the business.
The four major segments in the currency business are paper, printing presses, note accessories, inks and lastly integrators who provide total, end-to-end currency printing services. It is believed these businesses are tightly run by not more than a dozen companies operating out of Europe. These companies are believed to be operating since the 15th century. De la Rue’s history goes even further back to the company’s plant near Bath which has been a mill operating for 1,000 years.
De la Rue was the official Crown Agent of the British Empire who still prints banknotes for the Bank of England. Crown Agents ran the day-today affairs of the Empire. In his book Managing the British Empire: The Crown Agents author David Sunderland explains how the Crown Agents printed the stamps and banknotes of the colonies; provided technical, engineering, and financial services; served as private bankers to the colonial monetary authorities, government officials, and heads of state; served as arms procurers, quartermasters, and paymasters for the colonial armies. In effect, Crown Agents administered the British Empire, which at one point in the 19th Century, encompassed over 300 colonies and nominally “independent countries” allied to the British Crown."
(This entire expose was carried by Great Game India and further explored by the SabrangIndia.in team)
Note: In order to get answers to the above questions GreatGameIndia has under the Right to Information Act filed RTIs to know the truth of the matter in the service of the nation.
[1] Your RTI Request has been filed vide registration number RBIND/R/2016/53066; Your RTI Request has been filed vide registration number MHOME/R/2016/53193